Times certainly have been hard for Latin Resources Ltd (ASX: LRS) shares.
The ASX 300 lithium stock has lost over 45% of its value since the middle of May.
This has left its shares trading at 15 cents, which is down by approximately 63% on a 12-month basis.
Should you buy the dip?
Analysts at Bell Potter believe that huge returns could be on the cards for buyers of this beaten down ASX 300 lithium stock.
This is because of the potential of the Salinas Lithium Project in Brazil, which the broker believes could be operational in 2026. It commented:
The Salinas global MRE is now 77.7Mt grading 1.24% Li2O (compared with the December 2023 estimate of 70.3Mt at 1.27% Li2O). Importantly, the Measured & Indicated [M&I] component of the Colina deposit (within the global MRE) is now 67.3Mt grading 1.27% Li2O (previously 41.0Mt at 1.36% Li2O).
LRS is actively progressing permitting, offtake and financing to support a Final Investment Decision at Salinas by the end of 2024. Commencement of development in 2025 could enable first production in 2026. Financing and lithium offtake proposals have been received and are being assessed. The DFS is expected to be based on a similar scale project to the September 2023 Preliminary Economic Assessment. The PEA outlined ramp-up to 3.6Mtpa mining and processing rates to ultimately support +500ktpa Spodumene Concentrate production. Based on the PEA throughput assumptions, the current M&I MRE could support a +15 year project life.
Big returns tipped for this ASX 300 lithium stock
According to the note, Bell Potter currently has a speculative buy rating and 40 cents price target on the lithium explorer's shares. Based on its current share price, this implies potential upside of almost 170% for investors over the next 12 months.
To put that into context, a $1,000 investment could turn into approximately $2,700 if Bell Potter is on the money.
However, as we have seen before with this ASX 300 lithium stock (and others), those funds could also become significantly smaller if things don't improve in the industry. For that reason, this is certainly only an investment option for investors with a high risk tolerance.
Bell Potter concludes:
Key value catalysts this year are now the initial Reserves and DFS, offtake contracts, financing outcomes and FID. Colina has the potential to deliver new lithium supply into what we expect to be structurally short markets. Uncommitted offtake and an open share register provide further strategic appeal. Our valuation is $0.40/sh (unchanged). LRS is a project development company with prospective operations and cash flows only. Our Speculative risk rating recognises this higher risk and volatility of returns.
